Improvement Authority tasked with finding buyer

File PhotoCounty officials have tasked the Union County Improvement Authority with finding a buyer for Runnells Specialized Hospital.

UNION COUNTY — At their last meeting the freeholder board moved another step closer to unloading 100-year-old Runnells Specialized Hospital, which has been operating in the red for years.

At the June 27 meeting the board passed a resolution allowing the Union County Improvement Authority to begin marketing the 300-bed facility that also includes a 44-bed adult psychiatric unit.

The move paves the way for a sale or lease of the facility that sits on 45-acres of county-owned property in Berkeley Heights. If the county does end up selling the medical facility a consultant said earlier this year the property could net as much as $25.8 million while also generating much needed tax revenue for the county.

According to Union County General Counsel Robert Barry, putting this in the hands of the UCIA was a wise move.
“They have the expertise and have more flexibility in seeking out any potential buyers,” he said at the June 27 freeholder meeting.

County officials have said in the past that the financial problems with Runnells revolved around continuing reductions in federal Medicaid and Medicare reimbursements, which allowed the facility to operate at just a $500,000 deficit in 2007. Due to these reductions in aid the county is currently only receiving $222 per patient instead of $275 to $300 needed to operate without subsidies from taxpayers.

Freeholder Chris Hudak said the county could not continue to ignore declining federal and state reimbursements along with rising costs required to operate Runnells. He said reimbursements, while at $222 per patient now, were expected to fall 10 percent to $190 per patient. A number that realistically could not be subsidized by taxpayers, he said. This was backed up by Complete HealthCare Resources, the consulting firm hired by the county last fall to research alternatives to the county continuing to subsidize the hospital.

In the last several years the county has subsidized Runnells by more than $20 million because of declining federal and state reimbursements. And it is not expected to get any better. In fact, according to CHR, the outlook for federal and state reimbursements was anything but bright, which left the county looking for any and all options open to them, including selling the facility.

When CHR returned with their report last fall, it was evident that while there were additional ways to reduce expenses, none would get the county out of the subsidy stranglehold except to sell or lease the facility.

They reported that in 2012 the county had to subsidize Runnels by $13.1 million, and even with scrounging for additional revenues, they still would have to hand over $6.6 million in order to keep the facility up and running.

This, they stressed, was an optimistic assessment of how things might turn out, but considering the projected costs, the financial picture was grim.

Alternative options open to the county included not only lease or sale of Runnells but also sale of beds to a new operator while retaining ownership. This, however, would only net the county $3.4 to $4.3 million, not enough to get off the subsidizing hook. One thing they strongly advised against was keeping the status quo.

Doing nothing is not an option, the consultant reported, suggesting that the county begin to seriously look into one of the options suggested. Prior to receiving the report, the county did try to cut costs by bringing in a vendor to handle certain operations at Runnells, in addition to reducing staff. Last summer the county let go of 80 employees and contracted with the housekeeping and dietary services company Sodexo in order to slash costs, but that barely made a dent in the financial drain on taxpayers. In February, County Manager Al Faella, while not mentioning Runnells specifically, did point out that the county “desperately needed revenue,” to reduce the burden on taxpayers.

Although the deficit this year is less than in 2010 when the county had to subsidize the hospital with $14 million, the burden of knowing things were not going to get better has weighed heavy on the board. Politically speaking, the move to sell Runnells will not fare well, given the political football it became a few years ago.

In 2010, when the deficit was at $14 million, Republican challengers suggested the facility was a financial drain on taxpayers, but the incumbents, including Daniel Sullivan and Bette Jane Kowalski, fiercely defended keeping Runnells at the annual League of Women Voters debate. Both insisted the freeholder board had “made sure Runnells was self-sustaining economically and moving very solidly towards the future.”

Republican challengers Ellen Dickson, now mayor of Summit, countered the freeholder incumbents, pointing out that while she did not want to see Runnells sold, they did feel a study was in order to examine what was causing the hospital to run such a huge deficit. Sullivan visibly bristled at this comment, shooting back exactly how he felt about this suggestion.

“They have a plan and that plan is to get rid of it,” he told the audience, strongly supporting Runnells and the intention of the county and the Democrats to continue to support the facility.

Kowalski, despite having served on the board for many years and aware of the $14 million deficit the hospital had that year, argued that the hospital should remain a part of the county budget because it was tailored to senior citizens, but publicly skirted the issue at the debate.

“It is an extremely successful institution,” she explained, without backing up her statement.
At this point, it is unknown how long it will take for CHR to market Runnells and county officials preferred not speculating.